Pricey crude oil widens trade deficit

The rising trade deficit is a matter of concern, especially with India's currency already weak and a rising current account deficit would exacerbate the government's fiscal deficit challenges.

Published: 13th July 2018 10:52 PM  |   Last Updated: 13th July 2018 10:53 PM   |  A+A-

A rupee note is seen in this illustration photo June 1, 2017. (File | Reuters)

Express News Service

NEW DELHI: The country's trade deficit continued to widen in June, with rising export growth mitigated by an even higher rise in imports fueled by costlier oil.

According to government data released on Friday, the country's exports grew by 17.56 per cent in June to hit $27.7 billion due to robust growth recorded in sectors like petroleum products and chemicals.

However, the sharp rise in crude oil prices has pushed trade deficit even higher, recording a widened a 43-month high of $16.6 billion on the backs of a 21.32 per cent increase in imports, which hit $44.3 billion during the month.

June's trade deficit this year is the widest it has been since November 2014 when the gap was $16.86 billion. The deficit in June last year had stood at $12.96 billion.

The rising trade deficit is a matter of concern, especially with India's currency already weak and a rising current account deficit would exacerbate the government's fiscal deficit challenges.

"MSME sectors of exports are still feeling the pinch of liquidity crunch as banks and lending agencies have continuously been tightening their lending norms," said Federation of Indian Export Organisations (FIEO President Ganesh Gupta in a statement.

The primary factor in rising trade deficit for India has been the sustained rise in crude oil prices over the first three months of the financial year, with the crucial commodity breaching the $80 per barrel mark during June.

Consequently, Oil imports during the month were up by 56.61 per cent to $12.73 billion. These imports during the April-June, 2018 period were valued at $34.64 billion which was 49.44 per cent higher as compared to the same period last year. However, Gold imports in June dipped by about 3 per cent to $2.38 billion.

Total imports during the first quarter of the fiscal increased by 13.49 per cent to $127.41 billion. Trade deficit during that same period widened to $44.94 billion as against $40 billion in April-June 2017.

While import growth outpaced exports in June, exports of petroleum products, chemicals, pharmaceuticals, gems and jewellery, and engineering goods registered a positive growth.However, shipments of textiles, leather, marine products, poultry, cashew, rice and coffee recorded negative growth.

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